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University of Technology Sydney lecturer Dr Song Shi co-authored the paper, recently published in Real Estate Economics, which showed as prices remained high, an "irrational exuberance" in the Auckland housing market became apparent.

He said this was reflected in the "explosive" number of auction sales as house prices rose.

Co-authored by M. Humayan Kabir, from Massey University, the report showed in Auckland auction sales had risen from 10 per cent in 2008, to 40 per cent in 2013. It peaked at 47 per cent in mid-2015 - in line with the rise in house prices.

In Christchurch there were more minimal increases in the volume of auction sales from 5 per cent to 30 per cent, and in Wellington this stayed flat at just 5 per cent.

Shi said this showed Aucklanders were buying with "overwhelming confidence and unrealistic expectations in term of future price growth and rising prices" - a phenomenon known as "animal spirits" a term coined by a British economist John Maynard Keynes in the 1930s.

And although he said high prices largely drove this sense of confidence in the long run, unrealistic expectations also served to keep prices high.

"The boom of the housing market is mainly driven by social contagion rather than the knowledge of economic contagion," he wrote in the report.

"News about the continuous influx of overseas immigrants, shortage of urban land supplies and speculative activities from both domestic and international property investors have been widespread in the market."

Shi said these factors helped create "animal spirits".

"Media hype, stories, beliefs and the officially assessed home values for rating purposes also added to the urgency and excitement among homebuyers."

The report indicated that despite the efforts of the Reserve Bank of New Zealand and the New Zealand Government to dampen down the market the effects were "minimal" and "might work temporarily".

The report called for more to be done, now, before prices rose again sharply.

Shi said increasing the city's stock would help keep the housing bubble in check, as well as calm public excitement that would help ease pressure in the market.

"Corrective actions such as the initiatives by government to increase new housing supplies to control the bubbles can have a significant effect in the long run.

"But it is most effective to be done within a shorter time period, one to two years, to reduce the likelihood of irrational exuberance further fuelling house prices."